Stocks closed down 1 percent after the minutes from the last Fed policy setting meeting suggested the central bank could begin tapering bond purchases sooner than the market expects.
U.S. bond yields on the benchmark 10-year note rose above the key two percent level, the highest level in two months.
The dollar bounded up to a three-year high against a basket of major currencies in Asia on Thursday.
Crude fell after data showed a surprise jump in US gas stockpiles sparked demand worries.
U.S. Treasury yields on the benchmark 10-year note rose above the key two percent level on Wednesday, the highest level in two months.
Crude fell as markets fretted over Chinese data and a tapering of monetary stimulus.
Stocks Fall on Fed Fears, Weak China Data
Stocks remain lower in early trading but off the worst levels, as uncertainty about when the U.S. Federal Reserve may start curtailing bond purchases and an unexpected contraction in Chinese factory activity roil global markets.
Gold bounced back as the dollar fell, and markets reacted to suggestions the Fed may taper its stimulus.
Gold settled lower on Wednesday, giving up earlier gains after Fed comments.